The Impact of Mutual Fund Ownership on Corporate Investment: Evidence from a Natural Experiment

41 Pages Posted: 3 May 2011 Last revised: 2 Aug 2011

Date Written: July 21, 2011

Abstract

Mutual fund holdings data reveal a significant impact of mutual funds on the capital expenditures ("CapEx'') of their portfolio companies. Following the shock to mutual fund ownership caused by the 2003 scandal, during which 25 fund families experienced significant outflows of capital, firms held by distressed funds decreased capital expenditures on average. CapEx changes mirrored the types of funds: it decreased more (increased) in firms held by funds whose past ownership was associated with increases (significant decreases) in CapEx. Consistent with governance by the threat of exit, firms that drive the effects have higher wealth-performance sensitivity, liquid stock, bigger changes in ownership and the types of funds, larger number of distressed funds, and funds with bigger outflow.

Keywords: mutual funds, corporate investment, capital expenditures, corporate governance

JEL Classification: G30, G31, G32, G34, G39

Suggested Citation

Kisin, Roni, The Impact of Mutual Fund Ownership on Corporate Investment: Evidence from a Natural Experiment (July 21, 2011). Available at SSRN: https://ssrn.com/abstract=1828183 or http://dx.doi.org/10.2139/ssrn.1828183

Roni Kisin (Contact Author)

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
668
Abstract Views
3,171
Rank
71,264
PlumX Metrics